A Vital Distinction Between Credit Unions And Banks
When selecting a financial institution in Canada, there seem to be few choices – unlike our neighbour to the south, which has thousands of banks and credit unions. Is banking all the same in Canada? In this feature, we’re focusing on the key differences between credit unions and banks. Does it matter where you put your money and does that decision impact your financial goals? We hope to bring some clarity to these questions by focusing on three vital areas to consider.
Credit Unions have members. Banks have customers.
The biggest difference between a bank and a credit union is that a bank is a for-profit institution and a credit union is a not-for-profit institution. What does that mean for you? Simply put, this means that banks are in the business of maximizing profit and issuing dividends to their stockholders, not their customers. Since a credit union is a not-for-profit institution, they give their profits back to their members through lower fees, better rates, improved equipment, more services, etc.
This may seem subtle, but it is significant. A credit union is designed to funnel profits back to members and it is reasonable to assume that a strong credit union is in a better position to align with your financial goals. Profits at a bank are issued as dividends to stockholders – not used to improve services and experience for their account holders.
Ownership : As a member, you are an owner and you get a vote.
When you put your money into a credit union, you become part owner. This is a key characteristic excluded from a traditional bank. Every member has a share in the credit union that makes them a part owner. Every credit union also has a Board of Directors made up of its own members and every member gets a vote to elect their Board of Directors. Directors are motivated to create favorable policies at the credit union, whereas it can be the opposite with banks as they have a fiduciary responsibility to act strictly in the best interests of the shareholders primarily. This means in practice, credit unions are very motivated to provide great products and services to benefit YOU, the member/owner. Because credit unions are owned by its members, most also tend to be smaller and more community based supporting local initiatives that matter to its member/owners.
Relatability: The staff is like you. Members and owners.
Those you interact with at the credit union are just like you. Members and owners often live in the same community, with similar goals and needs. Such as keeping finance simple, looking for easier ways to save for the future, building a family, buying a home, paying off debt and achieving a personal financial goal. Credit unions offer personalized services, financial products, and educational resources. Some offer free seminars, blog articles, online calculators, and other resources to help improve your financial literacy and overall well-being. Some of the topics range from personal finance, budgeting, how to keep a healthy credit rating, ROI on home improvements, fraud prevention, and investing.
Credit Unions give their members an opportunity to improve banking from within so they can spend less time worrying about their finances and more time with family, pursuing their passion and simply enjoying life.